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Create a Bank Account called Transfer A/R & A/P
Enter the Bill in the Enter Bills Screen
Use the Pay Bills & at the bottom use the New Transfer Account you created. Enter the amount paid.
Customer Center > Receive Payments Screen. Enter what they are deducting > make sure it goes to Undeposited funds
Make a deposit > Deposit the amount into the Transfer A/R & A/P account.
This will zero out the account.
Create a Bank Account called Transfer A/R & A/P
Enter the Bill in the Enter Bills Screen
Use the Pay Bills & at the bottom use the New Transfer Account you created. Enter the amount paid.
Customer Center > Receive Payments Screen. Enter what they are deducting > make sure it goes to Undeposited funds
Make a deposit > Deposit the amount into the Transfer A/R & A/P account.
This will zero out the account.
Can you tell me what you did. I also have a vendor that takes what I owe off my bill and don’t know what to do. Thnks
You reconcile the clearing bank, which should always have a $0 balance, or you didn't do the Clearing or Barter process properly.
And there is no JE for the process where Names are involved. You already have Sales and Purchase data; there is no JE in addition. You use the proper functions, so that vendor name vs customer name is respected for the activity types of Purchases and Sales. A JE also bypasses your Cash vs Accrual basis reporting. You don't need more activity. You already have:
Sales, but the payment is "virtual" as bartered.
Purchases, but the payment is "virtual" as bartered.
And Clearing Bank = 0, as wash of the funds value, not real money traded.
Thanks for the answer, I didn’t do clearing but will. I just follow comments from above but make clearing account. I’m new and have been entering wrong because I wanted deposits in account, I haven’t reconciled in qb because I knew something wasn’t right. Thanks hope I can go back I have a couple to do. I appreciate your response
I did the journal entries. Applied credit to bill. Prepaid account is zero-ed out, BUT, there is no available credit to apply in the Receive Customer payment window. Credit AR with Customer Name. Debid Prepaid. When I open the AR account register, I see the JE, the credit amount is there with the customer name, but there is no credit in the receive customer payment window. I am on desktop QBs Pro 2017.
There should be No JE when Names are involved. You don't use JE for Sales or AR or AP, either. You should not have a JE for AP or AR in any QB program. You use a Clearing Bank to process the funds "virtually" that reflects what really happened for each name and type of event.
JE for AR and AP are not the right tool. You just bypassed Sales and items and all customer/vendor reporting functions.
Do it with a Clearing Bank, not as JE. Receive Payments, deposit to Clearing Bank and Pay vendors that same amount from the Clearing Bank. This is Barter.
Why can't quickbooks resolve this so that we can do this and ledger adjustment in one transaction?
"Why can't quickbooks resolve this so that we can do this and ledger adjustment in one transaction?"
Because thinking of this as an "AP/AR Swap" is bypassing all the Rules requiring the reporting of Gross Revenue, Gross Expense, sales, taxes, etc. The swap is a Barter event, not a Swap of AP for AR. It is instead of Real Money. And the Cash vs Accrual Basis reporting matters to nearly everyone.
How are you bypassing all of the rules for reporting gross revenue by doing a JE for payments? The revenue is recorded when you create the invoice and the expense is recorded when you enter the bill so all of your revenue and expenses are recorded. You are NOT receiving any cash when the invoice owed to you is being paid with a bill that you owe your vendor, so why would you use a cash account when there is no cash involved in the transaction? Doing a JE to credit AR and applying that credit to AP to pay the bill that you owe is not bypassing anything. When you write a check to pay a bill it creates a debit to the AP liability which is the same thing that happens when you create a JE and debit AP and when you receive a customer payment it creates a credit to the AR which again is same thing that happens when you create a JE that credits AR. I have been doing transactions like this in QB's for over 10 years. My accountant told me that Barter should NOT be created as a checking account because that is a cash account and there is NO cash exchanged with Barter. Please explain to me how revenue, expenses, etc. are being bypassed by recording a payment using a JE when that JE is creating the same debits/credits that writing a check for a bill and receiving a check for a payment does.
"Doing a JE to credit AR and applying that credit to AP to pay the bill that you owe is not bypassing anything."
You just bypassed Cash vs Accrual basis reporting. You just bypassed having a "payment" type activity for Bill Payment and for Invoice Payment.
It's best to avoid JE for Names. You already have Real Names to use on Real Transactions for names: vendor and customer transactions, not brute force accounting entries as JE.
"so why would you use a cash account when there is no cash involved in the transaction?"
It's called Barter. It is Virtual Funds, swapping of Values that is the same as full payment.
The Intuit instructions for Barter are right here:
This is bad guidance, "My accountant told me that Barter should NOT be created as a checking account because that is a cash account and there is NO cash exchanged with Barter."
The point is that it ends at 0 for any one date; that is the point of Barter = no Balance exists. It is a Clearing or Wash account, but now you get to use Real Transactions, such as Check Expense for the vendor name as Payee so that it reports on the 1099-Misc. Or, Bill Payment, if you are bartering a partial amount. And real Sales Payment, too, which might be against an invoice or simply done using a Sale Receipt "deposited" to Barter.
These are Tools. Your accountant will see you are giving the right outcome, but now you are using the right Transaction Types in QB, too.
You still have to receive a customer payment and pay a bill using the credit that the JE created. Nothing is being bypassed. ALL income, expenses & payments are being recorded the exact same way they would be if I received a customer payment with a check or paid a vendor bill with a check.
Thank you so much for that link I have been trying to figure this out for a year
I have the same issue -- my landlord is one of my clients, so I wanted to be able to deduct the rent from any invoices. Here is what I did:
This works! My expense still tracks to my expenses in my reporting.
I have attached a screenshot of my setup...
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